Saturday, August 23, 2014

All you want to know about Jackson Hole Summit

The Jackson Hole Summit is set to take place starting Thursday to Saturday this week, and traders are already buzzing about its potential impact on the financial markets. Allow me to break down what the event is all about, why it matters, and what might happen.

What is the Jackson Hole Summit all about?

While the symposium is held in a ski resort in Jackson Hole, the world’s financial leaders and central bankers won’t just be cruising down the icy slopes for three days. Instead, they are set to discuss current economic issues, potential action steps, and their global outlook… over steaming mugs of hot cocoa around the fireplace inside a log cabin.

This annual forum has been held since 1978 and has been sponsored by the Federal Reserve Bank of Kansas.

Why is this event important?

The fact that this economic event is held only once a year makes it a pretty big deal. Apart from that, this forum is also an opportunity for economic decision-makers to coordinate their plans for monetary and fiscal policies. With that, any announcements made during this summit tend to have a strong impact on longer-term Financial market price action.

Just to give you an idea of how this event rocked the markets in the past, remember that former Fed head Bernanke first dropped hints on QE2 back in 2010′s Jackson Hole Summit before actually implementing this policy change a few months later. Last year, the main topic discussed during the symposium was the Fed’s taper plans.

What could happen this time?

For the upcoming summit, market participants are expecting to hear clearer clues from Fed Chairperson Yellen on when the U.S. central bank might start hiking interest rates. After all, the U.S. economy has been showing consistent progress across most economic sectors yet the FOMC appeared hesitant to disclose any details on potential policy tightening. Many are expecting to hear dovish or cautious remarks from the Fed head, which could lead to dollar weakness and a surge in risk-taking.

Aside from that, the slowdown in employment trends might also be a hot topic. As seen in some major economies like the U.K., headline figures haven’t been so bad yet underlying components such as average earnings have reflected a concerning degree of economic slack.

Geopolitical tensions could also stir up a lot of conversation among economic heads, as the conflicts in Russia, Gaza, and Iraq could pose a huge threat to global growth. In line with this, leaders could also assess the potential repercussions of the sanctions imposed on Russia and by Russia.

As I’ve mentioned earlier, this event could set the tone for longer-term price action so make sure you keep your eyes and ears peeled for any important announcements. Do watch out for potential gaps if you’re keeping trades open over the weekend though!